Identify the cost and possible solution for agency problem

Reference no: EM131968793

Question: Division managers are padding cost estimates so as to show? short-term efficiency gains when the costs come in lower than the estimates. Which of the following statements correctly identifies the cost and possible solution for the agency problem in this? case? ?

A. One agency cost is that money budgeted to cover the project proposal is not available to fund other projects that may help to increase shareholder wealth.

B. There is no agency cost in this problem.

C. One way to reduce the agency cost is to base the reward system on how close the? employee's estimates come to the actual cost rather than having them come in below cost.

D. A reward system based on increasing shareholder wealth might motivate the division managers to make more accurate estimates in order to be able to take on additional profitable projects

Reference no: EM131968793

Questions Cloud

How much will your stock be worth : Dividends and Stock Prices. Your portfolio is 200 shares of Blue Morning, Inc. The stock currently sells for $96 per share. The company has announced.

Discuss the stages of life cycle development : M00005912 - Lifecycle Development - Learning Outcomes - discuss the stages of life cycle development; include in your discussion a range of factors

Calculate the cost of common equity financing : Calculate the cost of common equity financing using Gordon Model. Round the answers to two decimal places in percentage form.

Create a title page and a reference list with ten references : Create a title page and a reference list with 10 references from the last 5 years. Include the permalink for each reference.

Identify the cost and possible solution for agency problem : Division managers are padding cost estimates so as to show? short-term efficiency gains when the costs come in lower than the estimates.

What should the stock sell for today : The last dividend paid was 1.5 per share. the stock is expected to grow at 18% for the next four years then to grow at a constant 7% thereafter.

What is the effective annual interest rate being charged : If monthly compounding is in effect, what is the effective annual interest rate being charged by the bank?

Identify a major public administration theory : Identify a major public administration theory and select a public policy area at federal level such as health care, transportation policy, or homeland security.

Define what must the coupon rate be on the bonds : DMA Corporation has bonds on the market with 14.5 years to maturity, a YTM of 5.3 percent, a par value of $1000, and a current price of $965.

User Account

All Pages